Erstwhile cosmetics major Lakme Ltd plans to invest Rs 120 crore in its retailing business to develop a chain of retail stores in major cities throughout the country.
Speaking at the company's annual general meeting in Mumbai yesterday, Simone Tata said the company has already commenced its plans for the venture with an initial investment of Rs six crore.
The company expects to open around 8-10 store in a period of two years. The company expects a turnover of Rs 200 crore per annum in a span of 4-5 years.
Apart from the Bangalore outlet, bought over from Littlewoods of UK, Lakme plans to develop similar outlets in other cities like Chennai and Hyderabad.
"We may also merge the retailing arm of the company with Lakme," she added. The retailing business is being conducted by Lakme Exports, Lakme's 100 per cent subsidiary.
At a crowded meeting, which was Lakme's final one as a cosmetics company, some shareholders regretted the loss of the Lakme brand which was theirs for 40 years, but nevertheless congratulated the management for its intention to declare an interim dividend of 600 per cent.
Lakme meeting has passed the resolutions to sell the interests and investments in the capital of Lakme Lever and the sale of its plants at Deonar and Kandla. Simone Tata said the main reason for the sale of the cosmetic business was the losses the company suffered.
In 1997, Lakme-Lever posted a loss of Rs five crore which has been repeated in the first five months of 1998. The business needed huge investments of between Rs 50-60 crore which Lakme would have found difficult to contribute and sustain over a period of time.
Simone Tata also said there were proposals for a merger with HLL but the later was not willing to do so. Lakme will now sell its stake in Lakme Lever as well as the related brands owned by Lakme Brands for a consideration of Rs 200 crore. After a net of repayment of debt, this amount would reduced to RS 130 crore.
Lakme's 50 per cent stake in the joint venture would be sold for Rs 90.50 crore, while the transfer of all trade marks, house marks, technology, R&D infrastructure owned by Lakme brands would be sold for Rs 110 crore (against book value of Rs 79.53 crore).
However, the value for sale of Lakme's manufacturing facilities has not been decided and is being worked out mutually agreed auditors S B Billimoria & Co. After paying a interim dividend of 600 per cent, Lakme will be left with Rs 193 crore of liquid assets and Rs 20 crore worth of properties.
Simone Tata said, this huge cash position will be utilised in the new retailing facilities as well help the company in maintaining a dividend in the future.
